Business Finance

I have been in business for myself now for over 15 years and it is my experience that lenders do not like lending money with out bricks and morter security. There are probably exceptions but the interest rate is generally high.

You did not say wether you have your own home because if you do you would be better off to borrow against the equity in your home and use the borrowings to buy the business, thats assuming all the numbers stack up and having bought it you can make a profit and support the borrowings as well.

Yes, the Bank will consider the established income stream from the business you are purchasing.

They will however also look at your ability to continue operating the business. They will want to know if the vendor will be opening a new buisness in competition, and therefore be likely to shark some of your market. Also, is the business in a volatile industry, and therefore how reliable are the future income forecasts.

Business finance is a lot more complicated than home loan finance because it relies more on the future prospects of the business, rather than the historical. I know that sounds a bit round-about, but what it means is the Bank uses historical information to predict the future risk to the Bank.

It is also more expensive to establish, and the rates are higher, even with residential property as security. However, the benefit is that you are generally dealing with a lending manager who knows about the industry you are buying into, who will be able to turn the deal around much quicker than a residential manager, and who works in a department that is designed to assist business owners, i.e. you will get better service.

Its very hard to get finance for a business. If you have equity, then the easiest option is to simply get a LOC for ‘future investment purposes’, then buy your business with this.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email me

I also just do not agree with this statement at all. It is in fact not ‘very hard’ to get finance for a business, especially an established one. In fact it is sometimes ‘very hard’ to go to a residential lender and say, “I’m self employed and need to borrow money to expand my business.” or “I’m currently employed. I wan tot leave my job and buy an established business.” They are likely to say, “Why are you leaving your job?”

While they might eventually do it, it is probably going to take forever while the Bankers sort out who has the appropriate delegation to approve the finance.

Go to a business bamnking department. You’ll be dealing with people who know what you need to succeed in the business, and will be able to provide you with the support and advice you need.

oakley is correct. If you told the bank you wanted to leave your job to start a business, then it will be very hard.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]